A Manchester-based pair of father and son investment brokers have been disqualified for a total of 12 years after repaying themselves £1.37m while ignoring a creditor.
Craig Lummis and son Lee Lummis were each given six-year directorship disqualifications by His Honour Judge Halliwell in the High Court in Manchester on August 27.
They were told that from September 17, neither can be involved in the promotion, formation or management of a company without the permission of the court.
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According to the Insolvency Service, the investigation was into the operations of Manchester-based Avacade Ltd, a firm that entered into liquidation in 2015.
Rob Clarke, chief investigator of the Insolvency Service, said: "It’s clear that directors must treat all creditors fairly when they know their company is insolvent.
"Craig and Lee Lummis totally disregarded their duties by ignoring the ongoing investigation into the tax planning scheme and ensuring they benefitted personally from Avacade’s only assets.
"This failing led to them each being banned from acting as a director for a significant period of time and should serve as a warning to other directors who follow a similar path."
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During the proceedings, the court heard that Avacade Limited was incorporated in January 2010 and traded as Avacade Investment Options.
The company provided unregulated investment brokering services, including free pension reviews and made clients aware of self-invested personal pensions schemes.
One of the investments was in Costa Rican forestry plantations through a company called Ethical Forestry Ltd, whose directors were banned for six years in March and April 2019 after withdrawing millions using a tax planning scheme.
Avacade entered into liquidation in November 2015 - triggering an investigation by the Insolvency Service.
The court ruled that from August 1, 2014 Avacade ceased trading and was, or soon would be, insolvent.
The father and son had a "duty to act in the interests of Avacade’s creditors but their conduct fell below the standards expected", the Insolvency Service said.
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But they sold Avacade’s client database to a connected company for more than £150,000 when they "most likely" knew the company was insolvent.
Instead of the company receiving the payment for the database, just over £75,000 was deducted from the pair's loan accounts.
Investigators also discovered that between August 2014 and May 2015, Avacade collected commission worth more than £1.6m. The Lummis' however, received £647,000 each to reduce their director’s loan accounts.
The Insolvency Service said that further enquiries found that during these transactions, the pair were aware of the tax authorities’ investigation in connection with a tax planning scheme that Avacade’s directors caused the company to enter into.
This was yet to be resolved at the time of the trial.
UPDATE: In a statement, the Lummises said: “We are seeking permission to appeal this judgment.
"Contrary to the impression conveyed by the Insolvency Service, no creditors were left out of pocket, and the judgement makes this clear. We ourselves were amongst Avacade’s creditors, hence the payments to us.
"The only party for provision was not made was HMRC. But HMRC was and still is only a contingent creditor. The tax schemes that HMRC is challenging have not been proven to be ineffective.
"The judgment also makes clear that our decisions were taken under guidance from professional accountants and tax advisers.”